Black Friday gives retailers holiday hope

Can momentum be sustained throughout the season?

AndriaCheng

NEW YORK (MarketWatch) — Early indicators from Black Friday sales and foot traffic are giving retailers some hope for the holiday season.

Macy’s Inc.
M, +0.28%
Chief Executive Terry Lundgren, for instance, stood at the door of the company’s flagship store in New York’s Herald Square when it opened at midnight, and watched.

“The flow never stopped,” Lundgren said of the stream of customers, adding that he expects traffic and sales from Macy’s stores nationwide to top those from last year. But sustaining the momentum is the key, he commented. “We are going to do everything to keep shoppers coming.” Read related blog post about shoppers at different stores.

Black Friday — the day after Thanksgiving that signals the traditional start of retailers’ biggest selling period, and when they historically begin to turn profitable — actually began on Thursday this year with increasing numbers of merchants, including Wal-Mart Stores Inc.
WMT, +0.30%
Toys “R” Us Inc., Sears Holdings Corp.
SHLD, +0.28%
and Target Corp.
TGT, +0.07%
starting their “doorbuster” promotions earlier than ever on Thanksgiving night.

“Earlier openings are definitely beneficial,” Moody’s analyst Charles O’Shea told MarketWatch, saying he considers Wal-Mart an early winner based on his store visits. “The ‘early-opening arms race’ is definitely here to stay. Retailers not opening until this morning are potentially sacrificing some momentum.” The analyst expects retailers to report better Black Friday sales and traffic this year.

Spending beyond what’s on sale

Retailers including Macy’s, Best Buy Co.
BBY, +0.87%
and Toys “R” Us said they are seeing people buying beyond what’s on sale. Lundgren said shoppers were buying full-priced cosmetics and fragrance, for instance.

Andria Cheng/MarketWatch

Throngs gather outside Macy's right before midnight in New York City.

Consumers “were definitely buying and not looking,” Toys “R” Us CEO Jerry Storch said in an interview. He reported people were buying items such as its new Tabeo tablet device and Nintendo’s Wii U at full price. “They are still very focused on the value. While it’s a lower-margin day, we still make money. I expect [the shoppers] to return.”

At Best Buy, Shawn Score, its head of U.S. retail, told MarketWatch that while people were also focused mostly on sales, he also saw shoppers buying accessories and paying premium prices for some tablets and smartphones.

“The lines were good,” Score said, adding the company expects flat traffic compared with last year. “We see many carts full of items that weren’t on sale.”

With Best Buy, Amazon.com Inc.
AMZN, -0.13%
and others introducing Thanksgiving sales online, Internet sales look to reach another record. Record online shopping was seen on Thursday, with sales up 17.4% over 2011, according to IBM Benchmark. The number of shoppers using their mobile devices to make an online purchase also rose to 18.3%, about a two-thirds percentage increase from last year, IBM said.

The total U.S. online visits to the top 500 retail sites on Thanksgiving were up 16% compared with the same day in 2011, according to Internet data collector Experian Marketing Services.

In a positive indicator for Microsoft Corp.
MSFT, +0.00%
comparison-shopping site PriceGrabber.com saw the software giant’s new Surface tablet the No. 1 searched product on its site between Nov. 16 and Nov. 22.

Sale to the rescue at J.C. Penney?

Getting the kickoff right on Black Friday is critical for retailers this holiday season. J.C. Penney Co.
JCP, +1.27%
undergoing a major change that did away with coupons and sales, launched its only sale of the year at 6 a.m. on Black Friday to “honor the American tradition.”

Andria Cheng/MarketWatch

Aeropostale, Times Square in New York City

At Penney’s New York store, many shoppers waiting in line at registers and actually leaving with bags full of items may give the troubled retailer some hope, as it offered a lot of merchandise at 30% off and featured specials such as $10 sweaters. Nicola Welch, a 41-year old nurse from Brooklyn, with a friend left with bags of Penney’s merchandise.

“They have better clothes,” she commented, making note of the new merchandise including the in-store shop featuring i jeans by Buffalo. “I like the new JCP.”

Still, other shoppers said they showed up just for the sale items.

Friday is expected to be the biggest sales and traffic day this holiday season, after sales on last year’s Black Friday rose 6.6% to a record $11.4 billion, according to mall tracker ShopperTrak. The researcher expects foot traffic will be up this year, with overall holiday traffic seeing its first increase in five years.

According to a survey of retail chief marketing officers by BDO USA, retailers project a 3.1% increase in sales on Black Friday, suggesting they are more optimistic than last year, when they projected a 1.6% gain for the day.

Best Buy’s glimmer of hope?

Andria Cheng/MarketWatch

Best Buy at Union Square in New York City before its midnight opening.

Patricia Velasquez, who was waiting second in line outside of its New York store near Union Square on Thursday night said she was looking to buy a $420 Toshiba TV on sale for $179.99; a Blu-ray player at half price for $40; and a DVD collection of TV shows on sale for $8, down from $55. Her surprise find from the wait was a two-year warranty plan for $20 that she noted usually costs $120. See WSJ Worldstream video on what shoppers have to say.

Best Buy also signed her up for the company’s credit card while she was in line.

Still, signaling the struggles facing Best Buy, shoppers like Howard Werten of New York, 51, said this will be his last Black Friday stakeout after doing it five or six times over the past 10 years.

“There are no bargains,” the tech consultant said. “It’s the race to the bottom. Electronics are [a] commodity. Anything that’s [a] commodity, you can buy online. Electronics are getting cheaper. I don’t feel like the deal I’m getting is as good as in the past.”

At a Walmart in Union, N.J., Moody’s O’Shea said more than 1,000 cars were in the parking lot right when the discounter kicked off its Black Friday specials at 8 p.m. Thursday, with TVs as the big sellers. The analyst also noticed lines numbering hundreds outside of other stores, including Best Buy and Sears.

Stormy Outlaw, a health-care professional from Harlem, left Toys “R” Us at New York’s Times Square close to midnight carrying 10 big bags filled with toys that she said cost her $500 total. Among her buys was a $100 guitar on sale for $50, and a $40 videogame that was buy one, get one for $1. The veteran Black Friday shopper said that was just her first stop for the night with Target the next destination.

“With the sales, it’s worth losing a little sleep over. I saved a lot of money for the year for this,” Outlaw pointed out.

With the midnight and Thursday night openings, retailers appeared to be successful attracting teens and young-adult shoppers, said malls including Taubman’s Great Lakes Crossing Outlets in Auburn Hills, Mich.

Store checks point to “robust traffic at the onset of Black Friday,” J.P. Morgan analyst Matthew Boss said, adding that his team saw the busiest traffic among stores with the openings at midnight, even though he said the “typical 4 a.m. lull appears a bit deeper and longer at some locations.”

While the outlook for Black Friday may be positive, there are plenty of holiday-shopping days to go. Eight of the top 10 days of the season are in December, with the Saturday before Christmas the No. 2 traffic and sales day.

Macy’s Lundgren said the company will take the cue of what consumers buy on Black Friday to make sure it’s well stocked on those items in the last 10 days before Christmas.

As many as 147 million people plan to shop between Friday and Sunday, a slight decrease from the 152 million who planned to do so last year, according to a National Retail Federation survey. The lower traffic figure suggests to some that early openings on Thursday may be eating into traditional weekend shopping.

“Thanksgiving Day shopping is quickly becoming a holiday tradition for millions of Americans,” said NRF President and Chief Executive Matthew Shay. “It’s evident retailers’ promotions have really struck a chord with those looking for the perfect gift.”

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